Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby, the editor at The Australian. Welcome aboard everybody, and welcome to the first in our short series of special summer editions. And the idea of the series is to give you a perfect launching pad for your investment ambitions in the year ahead. Now, over the coming episodes, we're going to talk about shares, We're going to talk about property, we're going to talk about all aspects of
investing in twenty twenty five. Today we launch the series with the first of a two part episode on your Shares in twenty twenty five. We're going to talk today about share markets, the actual outlook for the wider markets, the ASIX, the SMP, then NASDAC next week we'll talk about individual shares. My guest today is Mark Jokum. He is the investment strategist at global x ETFs.
How are you Mark? Doing really well?
James, Thanks for having me on the show. I always enjoy our chats.
Thanks for volunteering for this one. This is the hot seat, Mark, This is the one for people will ring you and said you were on that show and you said such and such, what's going to happen, So we put that provisor out there.
That no one knows what's going to happen.
But let's take a look systematically. I think if we might, we might start with the ASEX a pretty good year for our market this year. We can always rely on our dividend need which comes in at a little over four percent, and that does make the AX a more stable market, but unfortunately it seems to be a slower dollar market at recent years.
Mark, Is that a fair thing to say?
Yeah, I think that's quite fair to say, James. We've seen the ASX performed well for the year. It's after just over sixteen percent year today, but a lot of that has come from the income site. In Australia, we have been lucky to have a high dividend yield relative to the broader developed markets. That being said, the dividen yield has actually fallen to some of the lowest levels we've seen in the last few years, so people familiar with the four to five percent may have to get
used to maybe the three to four percent range. And if you look in terms of what's really been driving the Australian share market, it hasn't been the earnings growth, it's been the price that investors have been willing to pay for some of these companies, the banks who have been on an absolute tear this year, and given they
performed well, they've got relatively high dividen yields. Next year, when we're looking into twenty twenty five, earnings growth might be relatively muted and we might see the multiple that people are willing to pay for ASEX stocks for which is why a lot of consensus is predicting that the AX will be relatively flat over the next twelve months.
But like you said, that cushion or buffer of what investors been Ossie's love income, particularly trusted forms of income, may see a flight of capital come into the Australian market as well.
So looking at twenty twenty four, when we say at sixteen percent or so they are there, about three to four percent of that was dividends and the rest was price growth. So if you say that when people talk about next year have been flat, if twenty twenty five was flat, that would mean that the ASEX is more or less where it is at the moment on the eight thousand mark. But we still get that three or four percent in view, so it's flat price wise, but
for us there's always the dividend. Do we pay too high a price as a market for that four percent of deal or as you say, it's even less than that.
Now, yeah, sometimes some people might say that we're paying a little bit high. I mean, if you look at some of our Australian banks, they are some of the most expensive banks in the world, trading at nineteen times earnings.
And when you think about the equity risk premium or how much willing to risk to invest in shares over bonds, when you're looking at some of the risk free rates or some of the bond neil that some of these big banks are paying same, some may argue, why am I taking such a higher risk for a lower return profile. Banks themselves have been a fantastic source of dividends, fantastic
source of return. Funnily enough, James, most of the banks returns from a capital perspectives, their price returns have actually been negative over the past decade, with the exception of a few like Macquarie and CBA. So with an environment that we're heading in lower interest rates, we might have a bit of net interest margin pressures of some of the banks, and these dividends have risen, but the payout ratios of these banks are providing have also risen as well.
So for a lot of investors they may think, well, how sustainable are these dividends that are going to be paid for the banks? If you've had pout ratios rise from around about seventy percent to closer to eighty percent. So overall, even though you know bank earnings went backwards really in twenty twenty four, there could be expected of rebound next year. That's why people have bit up these banks a lot. So are we paying too much potentially?
But overall there's still is a lot of from an income perspective, a lot of attraction within the Australian banks.
So the powers that be, the Brain's Trust, for want of a better word, are saying that they don't think Australian share markets will do much in twenty twenty five. They have a variety of reasons for that. One of them is pure mathematics that the earnings growth isn't there, and I imagine there's also some skepticism that we could
repeat what we did in twenty twenty four. Now here's the thing, Mark the market ASEX performance, that terrific performance of sixteen percent or so, which is double what you might reasonably expect on an average year.
Yeah. I mean, if you look at historically since the early nineteen hundreds, Australian share market is done around nine or ten percent, so that is a little bit above average.
It's quite a bit above average.
So all these people who are telling us that the market won't do anything in twenty twenty five and could finish the year of where it is now, these same people all said sell banks, and the banks are up above thirty percent. It druwed the whole market. They turned the whole market. It's the reason we did the sixteen. It's the key reason we did the sixteen. So should we listened to them?
Well, I guess this is too earlier, point James, around the perils of forecasting. There always seems to be some consistency that emerges with these forecasts. There's a tendency for large institutions to cluster, particularly around what consensus are thinking or rounded figures, and there's generally either unfounded optimism right or pessimism within asses.
But they feel comfortable if they all say the same thing, then nobody stands out as being particularly hopeless.
Well yeah, again, the analogy is, you know, back in the ninety nineties, no one got fired for recommending IBM, So yeah, there's this essence of job security as well. But I always am on the believer that short term forecasts have little relevance. It's really about the long term, but also around the earnings growth. So even though a lot of big banks have said to sell on banks, well, it's proven that it's actually been a bit of a
bad strategy going into this year. It's really about how you want to position your portfolios, whether you want to take certain sectoral bets or have an overarching view of the entire market which encompasses a lot of different indices. And from the Australian market, banks have absolutely smashed the
lights out compared to the miners and resources. There may be some sluggish growth coming out of the Chinese demand which could be a bit of a headwind for some of these companies, but a lot of people are thinking there could be mean reversion and some of the miners
and resources could drawback some of our performance. So overall, it still is a reason to be invested into shares, particularly the Australian market, but in terms of which sectors are going to dominate, very hard to say leading into twenty twenty five.
Okay, now those forecasts, the census being that the market does very little price plays, it's so much variation. Are there extremes that either around other peoples the market's going to drop twenty percent or twenty percent?
Is there anyone saying that?
No one's incredibly bearish. I have seen some forecasts from some of the big US investment banks that have forecasted price target to be around seventy nine hundred, so that does imply a little bit of before of a few percent.
But there's no one who's been incredibly bullish either, which is why some consensus has been around that eighty four eighty five hundred target, which as of recording today is relatively flat, a little bit different to some of our US counterparts, where we have seen a little bit more dispersion in some of the price targets too.
And looking inside the sectors then you know, I mean our market is very much banks sort of sense that banks won't run in turn twenty five and miners, I mean, yes, there's always issues around China, but I see iron ore again cruising over the one hundred dollars a ton mark, signaling robust health. You to have to suggest for our miners who are very much iron oral miners, and the big stocks even more so, so, is there only sort of sectoral forecast.
What's Yeah, if you look at the underlying earnings of some of the companies, there probably is a bit more upside within some of the targets for some of the miners versus the banks, which are expected to decline a little bit. I think most of the analysts have cell side ratings or either a whole position on some of the banks versus the miners where there is a bit
more of a buying or an overweight. But like you said, iron ore prices are relatively subdubed at the moment around one hundred dollars a ton, and that's on the back of a lot of the It's really a story about China and what that demand's going to do relative to the Australian economy. But you've still got a diverse set of miners who are operating in different areas. Outside of iron or copper has been incredibly popular in terms of
its electrification and application towards artificial intelligence. There may be a turnaround in the lithium market leading into an election year where we've got the opposition party who's a lot more bullish on sectors like uranium. That could play a part. For uranium mining, Australia's got about a third of the reserves where it comes to uranium, so there's other vectors
that people could be looking at as well. So far this year, technology has been one of the best performing underlying sectors here today, followed by financials, whereas some of the worst performing sectors have actually been energy and materials so far. So there could be a little bit of mean reversion, but that's where it makes sense to own a broad market. Or let's say you actually don't want to own the banks or some of the miners, and you want to play more on the industrials, the tech side,
or really the other half of the market. You could look at funds that actually exclude both banks and miners for your addie allocation. So various ways to play it based on your sector positioning next year.
As an investment strategist, are you a believer in reversion to the me Do you think that what did you say ten percent every year on the Australian's share of market since nineteen hundred. Do you think like that's it? It's always ten percent.
I am a believer in mean reversion, but not over the short term, because things can run hot for a long period of time, like we've seen with the whole idea of growth versus value. Everyone is saying that value stocks and the value factor has to eventually come back, but they can go on wild rise of our performance for a long period of time. So eventually there will be reversion. But in terms of calling that, and I
think that's a tough thing. With predictions. It's not only do you have to get the call right on which sector you want to be positioned in or which stock, but you have to get the timing right around when to buy and also the timing right of when to sell, which is a trifecta or a very hard recipe for investors to do. So to answer your question, I am a believer in mean reversion, but when it will come, no one really knows that.
I've had some deeply frustrated value investors on the show, and they really thought that they had come in twenty twenty four. They really thought it was all going to follow to Jason, it didn't be our performance in the market Internation twenty four Whatus Technology and Finance stops suggest that at all we take a break and look at an extreme version of what we're saying, which is the US market, which of course is going to treat the world share market and it's going to dicteat our own
ASX Market Internation twenty five. Back in a moment, Hello and welcome back to the Australian's Money Puzzled podcast. I'm James Kirby. I'm talking to Mark Jocum of Global XCTFS, and we are talking about what is going to happen in twenty twenty five on the share markets. Now, Mark, cast your mind back this time last year, people would have been saying, well, that was a very good year on the US market. You can't expect that ought to
happen again. You can't expect subdued or modest ordinary earnings growth and terrific price appreciation.
On the market.
You can't expect Donald Trump to win again, good God, and have the whole Trump bump again. And of course it all came to pass. And just to top it off, you had the whole thematic excitement around a to the point that the world's biggest share is now Nvidia, which was virtually unknown I would say a year ago.
So let's see.
I think that was a very good approach for a listeners market. What we did there and what you did at the first segment of the show where you give an idea, because we have to have something to hang our hat on, and we're not saying we believe these forecasts. We're all smart enough to know the forecast. For forecasts, nobody knows the future. However, let's at least know what
they are. So the contensus forecast for the AX was basically that the share prices will go nowhere and the dividends would come in and we might do three or four percent totally return.
Now that's not the situation in the US. Tell us about what the US markets are looking like, what the forecasts are looking like.
Very interesting market, And like you said, James, not many people would have expected the S and P five hundred, which is the I guess the benchmark that a lot of people refer to for US equities to have done so well on close to thirty percent for the year on the back of a great year for twenty twenty three that i'd had before, and looking into twenty twenty five, we've actually seen a lot more abolishness that continues within the US share market, and I think one of the
reasons for that is the US share market is projected to drive most of the earnings growth versus some of the other markets. In Australia, you're relatively flat, maybe a few percent in terms of earnings growth, but companies in the SMV five hundred are expected to generate earning's growth
of about twelve percent. So a lot of price targets for the US market at SP five hundred are hovering around sixty five hundred, which implies a bit about eight percent upside from where we are now, but you'd have a lot more divergence compared to the Australian market, where you have seen some banks being as bearish as around fifty eight hundred, so a little bit of a decline, whereas some banks being as bullish as reaching around seven
thousand points, and we've just reached six thousand, which has been a record high. A lot of people are confused record highs, doesn't that mean it's due for a pullback, but the valuations are justified because a lot of this has been supported by stronger earnings growth from these underlying companies. And you mentioned before the likes of Nvidia and Apple. Funny enough, they are playing a bit of a tag between who's the most valuable company. Right now it's Apple,
the next day it changes. So really really big earnings growth from a lot of these tech giants as well driving a lot of that US share market return.
So even if it came to pass, and let's talk about that consensus this books is a consensus estimate or the price appreciation or the percentage increased would occur on US markets as represented by the S and P five hundred, and what the brokers are seeing is that they're expecting something in the order of eight percent for that market. Now,
eight percent is perfectly solid, good return. However, a couple of things, it would be less than a third of the return this year they've been joined in the US.
That's one thing.
The second thing is that the dividend years, where we talked about. In Australia, you always for toically returned on three.
To four percent for the dividends. You don't add on much in the US. Ad all what would you said to be added.
On usually one to two percent for the US. A lot of the US companies reinvest in their growth, They spend a lot on capex, dividends, and income is not a big focus for US investors. That being said, there are ways to get income from the US by focusing on high dividend yielding sectors, whether it be industrials, telcos and other sectors. But if you look at the US index, predominant of it is in communications intech, and.
Their high dividend would be like three or four percent, while our high dividend would be four and five percent, and then you get franking on top of that taking home six or seven. So there's the still competition on that front.
Is there really exactly right?
You get the aut attacks benefits of having exposure to high dividends in Australia, but it's really important James, that a lot of investors apply a total return approach to investing. You incorporate both the capital and the dividend side. So whilst the Australia market can definitely provide income and maybe that's where a lot of investors who are income orientator want to focus, there still is this huge market being the US, which is expected from an earning's perspective to
grow close to double digits. You could be missing out on that capital side if you only focus on income. So we still have I guess from global access perspective of view that the US will continue to march on. They continue to be in this mid cycle expansionary phase. Considering that we've seen this renewed optimism from the US election, there's a bit of animal spirits in the air, bit
of a risk on sentiment. Some of the key appointments from Trump seem to be very bullish for the market overall, and US companies they've got some of the biggest capitalist machines in the world. So a lot of people might think, well, I have to be involved in the megacap tech names to get those big returns, because that's where a lot of the returns have come. But funnily enough, the contribution of these magnificent seven names, the likes of Nvidia, Apple, Microsoft,
has actually decreased in twenty twenty four. In twenty twenty three, they contributed close to two thirds of the total markets gained, whereas this year, James they've actually contributed around about half.
Still a lot.
Don't get me wrong, but you're starting to see a bit more of a potentially broadening of the concentration is more a feature than it is a bug of markets, because naturally there's only a handful of companies that drive the majority of total share holder returns. When you're seeing this broadening out of the markets, we could see a bit more interest in smaller companies in the US or
other sectors. As there seems to be this diversification of earnings and improved sentiment, we may see new players come in to the leading performers of the US market. If you look at some of the leading companies in the US so far, Nvidia and some other companies have been huge contributors. But there's also other companies that have done exceptionally well.
Just tell us who they are outside the magnificence of and outside the tech titans.
Yeah, so in VideA has been the biggest one. They are put about one hundred percent year to date. But then you've got other companies like energy companies. There's a Texas based company called Vista co Operation. They up over three hundred percent year to date. You've got other companies such as Texas specific Land corp as well. They also more involved in land and resource management. They up around two hundred percent for the year. So you are seeing this broadening and are.
There what about the blue chips, the original Dow blue Chips.
How have they come to the party yet?
Yeah, I mean the Dow Jones is at what around about forty four thousand at the moment, forty five thousand at all time highs. So you're still seeing strong support for US equities. And that's why I think it's important to remain invested. You can be invested in the megacap tech names or the fang names, but having exposure to the blue chips, where it's your Dower Jones, looking at smaller cap names, looking a bit more of a broadening trade.
It's important, particularly because Trump is very pro business, pro deregulation, reducing corporate taxes. We're in a disinflationary environment. He's also very supportive of energy companies as well. You know the Mantra Drill, Baby Drill.
It's and I suppose Mark the rational part of this is you cut corporate taxes, you immediately lift corporate profits, You immusuitly lift earnings. Share prices should go up, so This is a real driver in the short term, but what about the longer term? Like any government that gets selected on promises and various policy changes, their honeymoon ends.
We don't know how it lend, but it will end.
And we have deeper concerns about tariffs with the US and how that would actually ultimately so everything YouTube in the US.
Yeah, I think you're totally right, James, and tariffs in itself is in fact inflationary when you think about the impact of the underlying consumer, the underlying US companies, and even though what we're seeing, particularly within global markets is economies are flexing their geopolitical power, and the US has come out to say we want America for tariffs on everything. That in itself could create some pressures for some of the underlying companies given that their input costs may rise.
So yes, you may see more development coming out of the US. But I think a lot of these measures which is the opposite of what we've been used to.
It's all been about.
Free trade agreements, globalization. Things are changing, but the US is definitely still keen to power on and if you look at some of the key appointments I was mentioning before that Trump is built out there, does seem this idea of maturity coming in. They've got Scott Bessant, who's the Treasury Secretary, and he's come in with this three
three three policy. He wants three percent GDP growth, he wants to reduce the budget deficit by three percent, and he wants to increase the barrels of oil they're producing by three million barrels a day. So you are getting this element even though there's less globalization and tariffs. The whole idea of Trump two point zero when he gets inaugurated in January may create some uncertainty. These US companies strong franchises are going to continue to generate significant profits
unless there is regulatory intervention trade wars. Will need to monitor those risks closely. It can be a challenge for growth if these tariffs materialize. But overall, we are seeing some of the greatest capitalist machines experiencing strong earnings growth in twenty twenty four, set to continue into twenty twenty five.
Actually, one thing I wanted to choose this segment off on is the theory that as it trickers down through the US and the Magnificent seven already feeding as a contributor to the overall market returns. Excellent market retires are coming out of the US. Then there's the theory that the hardest part of the market will be small caps. What do you think of that US market small caps?
The thing about these large tech companies, all these hyper scalers as they're known, they're expected to increase their capital expenditure into twenty twenty five to hundreds of billions of dollars.
That significant spending will benefit a wide variety of sectors, whether you're looking at data centers, engineering and construction, nuclear, renewable power, gas power, electricity, there's so many different sectors that could benefit from it, which is why you're seeing a lot more interest in this broadening out of the trade. A lot of people are thinking, well, a lot of these tech companies that are reporting, not only James, do you need to beat Earning's expectations, but you almost need
to beat the beat, if that makes sense. And that's why you'll see so much scrutiny on these big tech companies, which is why a lot of people are saying there has to be this broadening out of this trade, this reversion of small companies which is underperformed versus large cap companies, and we do see quite a bit of growth happening in some of these smaller companies relative to where they're trading at the moment, because if you look at where the S and P five hundred is trading at, it
may look elevated, but as long as the earnings continue to support it, that will justify the valuations. There's been a bit of compression in the small companies area, so there could be a bit of a rotation, and we've started to see it more money flow into to smaller companies or broader sectors.
That would be small company tfs, small capfs, Yeah, small companies ETFs.
You've got different companies that are a bit more evenly distributed as well. But yeah, we have seen more flow into some of these smaller companies where it be both active or index based strategies. And I guess those a little bit different to your broad cap because you're not only holding the magnificent seven, but you're holding hundreds, if not thousands of companies that have different characteristics and exposures
to the megacap companies. If you look at a small cap index, it's around about twenty percent financial, maybe fifteen percent industrial, whereas tech is only around about ten to fifteen percent. Very different to your megacap indices such as the S and P five hundred or the Nasdaq one hundred.
Okay, now we'll take a short break and folks, people to be back and we will take a quick look at some other areas of the markets in twenty twenty five. Will take a look at the NASDAK, possibilities emerging mar and a quick glimpse at gold, which I would put in this very tradable area. Okay, back in a moment, Hello, welcome back to the Australian's Money Puzzle. James kirk Be talking to Mark Jogum of Global x ETPs. We're talking big picture here today, folks.
We really are NASDAK.
Then we would traditionally expect NASDAK to shoot out the lights that if that if the SMP was doing eight percent, we might think the nasak's got to do sixteen percent or something like that. What are they talking about on the Nasdaq, Mark.
Yeah, we talked about the S and P five hundred being a key contributor, but the Nasdaq, which holds a lot of these megacap names that we were talking about before, they've done exceptionally well to pull the NASDAK to record high at about twenty one hundred points at the moment, where the price targets are looking closer to twenty three hundred leading into next year. So that to me is saying that there's still potential upside for the Nasdaq one hundred to do a lot of the heavy lifting. And
that's because earning's growth. We talked about it before with the S and P five hundred to do low double digits. The Nasdaq is looking at doing closer to eighteen or nineteen percent next year from an earnings growth perspective. For a lot of investors who want exposure to US shares In particular, the Nasdaq has been this market dialing of being a great driver of share market return.
So it did about thirty percent or sill, which is an amazing figure except that we've seen it so often. But it did thirty one percent or still in twenty twenty four. The NASTAK we've ignored the dividend ut here entirely. What are they saying as a forecast as a percentage growth for Nasdaq in twenty twenty five.
So according to.
The consensus you're looking at at a target of around nine to ten percent upside, which is a little bit more than the SMP five hundred, and.
That's cool for a NASDAK listened to it.
I mean, the Nasdaq tends to be a little bit more volatile than broad indices like the S and P five hundred, so you may experience perhaps wilder divergences like we saw in twenty twenty two where the Nasdaq fell a lot more than their S and P five hundred.
But overall, I think because a lot of these companies continue to derive a lot of their revenue from technology and how much of these exposures are to NASDAK related indices, you could see these hyperscalers and these tech companies continue to do looking long term, despite concerns around the rich valuations and the Nasdaq or the broader US market trading at a pretty expensive premium, that doesn't necessarily mean a reason not to be invested, because, like we said, the
business cycle is still an expansion. You've got a pretty healthy labor market and a lot of these Nasdaq returns have been driven from AI related activities and that can continue to drive We're seeing huge forecasts being expected for some of these AI related possibilities, and I think a lot of these companies are beginning to monetize a lot of their services. Looking at companies like open ai, who
who use the technology of chat GPT. They expected to finish twenty twenty four with about five billion dollars in revenue, and that's expected to grow to ten billion dollars next year. With clear momentum and expanding use cases, AI is going to be a really compelling investment theme leading into twenty twenty five. That is very compelling for companies involved in those industries which tend to be on the Nasdaq overall. So yes, could be another good year for the Nasdaq overall.
A lot of the growth is priced in because of the projected earnings growth that a lot of these companies are planning to do. It might just be more on the top line, more from a revenue perspective, whereas this year has been from an earnings perspective.
Which is what the market really loves.
All right, very interesting, So folks, I think the more risk in the market, the less useful the forecast. I would be considably more persuaded by a forecast for the AX whatever that might be because you're working off certain known gnomes, if you know what I mean, and the risk element is subdued because we have a lot of blue chips, police banks, supermarkets and minus where you could
have a very good idea of their business. In the US, you have a whole elevated risk and risk taking which gives wonderful results, but also means someone talking about nurse actor in ten percent next year is kind of like in a way.
It's supposed extreme, utterly useless.
I don't mean to I'm sure you actually agree with me, even though I don't know if you agree with me, do you?
I totally agree with you.
If you look at the average forecast for the S and P five hundred in twenty twenty four, James, so we're recording this at the end of twenty twenty four, the average forecast was forty six hundred, and the upper range of that limit in terms of who was the most bullish was fifty four hundred, and we've blown through six thousand points. So there was one research company in those forecasts that had an era of around seventy seven percent because they were too bearish. That shows there is
an issue. While the price factor was wrong, the earnings, funnily enough, was right. So a lot of these people who were who were forecasting their earnings growth were very accurate. But the reason it's so hard to predict is you don't know what investors are willing to pay for those earnings. And in twenty twenty four, the answer was they are willing to pay for a lot for some of these
earnings growth. So yes, with a word of caution, take anything that I say or what the market consensus is saying with a grain of salt, because there's a lot of perils in forecasting.
Absolutely, as you say, people who were seventy percent of oubts just pretty bad.
If we can't quickly two areas.
That people who had ETFs and they were looking or people who were trying to diversify their portfolio. Our listeners on chair markets who were using funds with ETFs to do so, would be looking to complete the picture. They might look at emerging markets who they might look at gold are the emerging markets?
It would seem the election.
Of Trump and he's talk about tariffs, a strengthening US donor could possibly be good for emerging markets.
Perhaps I'm wrong.
What's the story on that side of things.
No, James, your sentiment is correct in terms of a lot of people thinking that the Trump trade is going to be quite bearish for some emerging markets, given a lot of the issues around tariffs, higher for longer interest rates, a strong US dollar because a lot of emerging market debt is denominated in US dollars, so a rising US dollar is generally bad for them, tightening financial conditions. You're not seeing too much out of China, and I think on China it is a pivotal player in the emerging
market story. It's grappling with modest stimulus efforts that seem relatively insufficient to spur a bit of a meaningful recovery. And considering we've seen this like we saw during twenty eighteen and twenty nineteen, China still is a very big global manufacturing powerhouse. It dominates that sective estimate around thirty five to forty percent, so it is quite crucial from a global supply chain. So for investors, China is a bit of a mixed picture. The outlook remains challenging. Corporate
earnings might be weaker and predictable. Elsewhere in emerging markets, there might be some bright spots. We've seen the likes of Taiwanese companies like taiwan Semon Conductors key play in the technological revolution, but we've found that India has been a standout performer and one of the fastest growing economies as well, bolted by strong balance sheets, fiscal maturity, and
unlike China, India is driven from domestic revenue. You might be able to insulate some of that risk associated with global trade tensions, even though India is becoming a part of the global environment. It's a very compelling growth story, powered from elevated profit margins, strong earnings expectations. As a big demographical shift as well, India has become the world's largest population, overtaking China. In terms of the Emerging Markets Index,
India is likely to be a bigger player. I still see some opportunities emerging within emerging markets.
They're up with the country based other than the category.
Yeah, there might be a bit of country divergence. Overall, A lot of the forecasts are expecting even though they might be stronger earnings growth with some of these companies, and because they're trading at such heavy discounts relative to where they valued, you might not see as much upward growth in terms of the price predictions as the US market.
So we're also talking about single digits here. But from a country perspective, yes, it could be that there might be a divergence that a lot more people are interested in emerging markets like India. If you look at what's happening with this AI strategic revolution and some of the associated themes semi conductors or the companies that are making some of these chips, it's still going to be a key component within next year's earnings for people who are
looking for these types of companies. Doesn't mean that you shouldn't look within emerging markets. It just might mean people might be a little more tactical with how they allocate towards emerging markets.
Okay, people just saying I won't push any harder because I don't think anyone could possible to give an answer With India, you know it's going to finally come through in the way that many people have thought it could and would that for every individualistic to make their own better.
Okay, before you go, one last thing. Gold.
Now, gold has been good and has been good for quite some time, and you find that even the bullers and bears like gold. In this environment, gold investors will always find competing reasons to buy gold under any conditions to today's conditions. I dealt there's a consensus as to what gold will do in a year.
Is there?
I mean a lot of people are in the business of making predictions of what the gold price is going to do, and at the moment, James, the goal price is hovering around about twenty six twenty seven hundred dollars an ounce. I've seen some forecasts from some leading banks who have very smart analysts, way smarter than me looking at and they've got models of how they have their price forecast looking as high as close to three thousand dollars in terms of proyouns on a US dollar basis.
I think because of the there's a lot of tailwinds within the demand for the precious yellow metal. If you are worried about raising geopolitical tension, gold is naturally that safe haven. When Trump did initially come into power, we did see a little bit of a selloff in gold. It was a rising US dollar. People were a little bit more confident, but there could be still some ongoing
geopolitical tensions. I know there's been a bit of a ceasefire at least a promise within the Middle East, but who knows around ongoing tensions that's going to happen, and that boats quite well with the gold price. In terms of inflation being put back in the genie bottle. Who knows whether we may get a reflationary trade. Everyone is talking about disinflation and we're getting close to that target
band where most economies want inflation to be. But if there is a bit of inflationary surprise to the upside, gold is a proven commodity to provide that hedge against inflation. And Trump's policies may be inflationary, there could be more from a fiscal deficit perspective, people wantrorried about how much debt is involved in the global economy. There still could be a lot of tailwinds for gold. And if rates do continue to fall and real yields continue to fall,
that also bodes well for the gold price. So overall, plenty of tailwinds for the precious yellow metal. Very important part of clients investment portfolios, particularly as a defensive hedge, because I always say that if gold is the worst performing acid in your portfolio, it means the rest is doing.
It was a good year assuming you have a diversi folked portfolio.
Exactly.
This year has been different where gold has performed exceptionally well in terms of relative returns to the broader market.
The point you're making is its performed very well. I still did everything else.
It was coordinators, which exactly or are you Sometimes normally you have different correlations within gold and other asset classes over the long term, but this year there's been different drivers. You've seen major demand from central banks. You've seen flows coming back into ets for gold. People are wanting that as a safe haven. You're seeing strong and from emerging economies because gold also has that industrial application, It's got
the jewelry application as well. We've seen India stockpile leading into the celebratory season as well. But overall, great diverse fire to having your portfolio. Yes, it has performed quite well, but it's not meant to be the return driver. It's meant to be the defensive cushion you have in your portfolio when everything else doesn't perform well.
Well, that was a terrific round the world with Marked Your come in forty four minutes, as it turned out, terrific Marked Global gctf's investment stressages. Thanks very much for coming on the show.
Thanks for having me James, Well, look.
Forward to having you again on the show Cross Finally Fire. Well we will return to see how some of these consensus predictions turned out over the year. Thanks very much everybody for listening. Keep those emails rolling. Love to have some correspondence from you the Money Puzzle at the Australia dot Com Dot You. Today's show was produced by Leah Samuel glup Toku Soon the Wood
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